This article examines what SRT trades are, how repackaging programmes work, and why they are so widely used by banks and investors in the global SRT market.
Introduction to SRT Trades
Significant risk transfer (“SRT”) transactions have become an increasingly important tool for banks seeking to manage their regulatory capital requirements. In a SRT trade, a bank (the “originator”) transfers the credit risk associated with a portfolio of assets, typically loans or other credit exposures, to a third-party investor, thereby reducing the risk-weighted assets held on its balance sheet. The repackaging programme has emerged as the structural vehicle of choice for executing these trades.
What are SRT Trades and how do they work?
